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The great bank robbery

By this time next week, the FSA may have made the biggest mistake in its history.

Forget the mishandling and blame-shirking over Equitable Life or the madness of an ombudsman review of endowments that uses retrospection while the FSA claims it does not.

Ignore the PI nightmare – due to uncertain regulation.

Overlook the scars left on the compensation scheme as the carnage of phoenixing took hold.

Dismiss the plot to get rid of polarisation far far too early if it was ever a wise thing to do. Overlook the mismanaged regulation of networks which grew too fast as a result. Whoever thought Inter-Alliance – an IFA stuck together with sticky plasters rather than contracts and proper agreements – was a good business?

Do not dwell on stakeholder, where decision trees gave consumers little idea about pensions.

Forget that the FSA’s consumer website described zero funds as lower risk than many other ungeared products.

With precipice bonds, do not remind anyone of the fund guides which passed FSA muster, only to be damned later as the worst case of mismarketing it had ever seen.

Forget the ignored warnings from investment IFAs about what would happen to precipice bonds in a bear market.

Finally, as it uses one part of paper by analyst Ned Cazalet to attack IFAs, do not ask why on earth it is ignoring the scathing section in Polly Put the Kettle on Personal Accounts – potentially the most damaging pension reform in history.

Having failed to regulate retail financial services either fairly or effectively, the FSA may be about to do that dumbest thing yet.

It may gamble on the banks and hope they can deliver what the regulator needs to the mass market. If there is no significant profit to rival, say, credit cards or payment protection insurance, they won’t. A casual glance at our front page last week and the comments of Barclays Financial Planning will show you why.

One last thing. If the FSA is planning to regulate advisers out of existence, we can promise one thing. You might hate them now but when you have no one to blame for your own mistakes and the banks have you in a monopolistic headlock – you’ll miss them when they’re gone.

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